THE COMMISSIONER OF INCOME TAX versus M/S. CATAPHARMA (INDIA) PVT. LTD.

Citation: [2007] 8 S.C.R. 465 · Decided: 23-07-2007 · Supreme Court of India · Bench: ARIJIT PASAYAT · Disposal: Dismissed

Judgment (excerpt)

THE COMMISSIONER OF INCOME TAX 
A 
v. 
M/S. CAT APHARMA (INDIA) PVT. LTD. 
JULY 23, 2007 
[DR. ARIJIT PASAYAT AND D.K. JAIN,JJ.] 
B 
J. 
:...; 
Income Tax Act, 1961-s. 80 HHC-Turnover'-Computation of-For 
computing deduction-Whether includes 'Sales tax ' and 'Excise duty '-Held· 
'Sales tax' and 'Excise duty' cannot be included in the 'total turnover' for c 
computing the deduction-Interpretation of taxing statute. 
Words and Phrases-' Turnover' -Meaning of. in the context of Income 
Tax Act, 1961. 
The question for'determination in the present appeal was whether 'sales D 
,... 
tax' and 'excise duty' are includible in the total turnover for computing 
"' 
deduction u/s 80 HHC of Income Tax Act, 1961. 
Dismissing the appeal, the Court 
HELD: 'Excise duty' and 'sales tax' cannot be included in the "total E 
turnover". Tax under the Act is upon income, profits and gains. It is not a tax 
on gross receipts. The object of the legislature in enacting Section 80HHC 
of the Act was to confer a benefit on profits accruing with reference to export 
turnover. Therefore, "turnover" was the requirement. Commission, rent, 
interest etc. did not involve any turnover. Just as interest, commission etc. 
did not emanate from the "turnover", so also excise duty and sales tax did not F 
emanate from such turnover. Since excise duty and sales tax did not involve 
any such turnover, such taxes had to be excluded. 
(Para 4) (468-F, G, H; 469-Al 
Commissioner of Income Tax, Coimbatore v. Mis. Lakshmi Machine 
Works, JT (2007) 6 SC 236, relied on. 
G 
I 
C/Tv. Sudarshan Chemical Industries Ltd, (2000) (245) ITR 769 (Born.), 
. ~ 
referred to . 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3204 of2007. 
465 
H 
466 
SUPREME COURT REPORTS 
(2007) 8 S.C.R. 
A 
From the Judgment & Order dated 17.07.2006 of the High Court of 
.....( 
Judicature at Bombay_ in Tax Case (Appeal) No. 915 of 2004. 
K.P. Pathak, A.S.G., Arijit Prasad and B.V. Balaram Das for the Appellant. 
The Judgment of the Court was delivered by 
B 
DR. ARIJIT PASAYA T, J. I. Leave granted. 
2. Challenge in this appeal is to the order passed by a Division Bench 
of the Bombay High Court relating to the question whether sales tax and 
excise duty form part of the totat"turnover. Dispute relates to the Assessment 
C year 1997-98. 
3. Background facts in a nutshell are as follows: 
While making assessment under Section 143(3) of the Income Tax Act, 
· 196 I (in short the 'Act'), assessing officer included excise duty and sales tax 
D on the total turnover for computing the deduction under Section 80 HHC 
(3)(b) of the Act. The Commissioner of Income Tax (Appeals), Special Range-
l, Nasik (in short the 'CIT' (A), he.Id that while calculating deduction under 
Section 80HHC amounts of excise duty and sales tax collected by the assessee, 
are not to be included in the total turnover for the purpose of computing 
deductions under Section 80HHC. Revenue preferred an appeal before the 
E Income Tax Appellate Tribunal, Pune Bench, Pune, (in short the 'Tribunal"). 
The appeal was dismissed following a decision of the Bombay High Court in 
C/Tv. Sudarshan Chemical Industries Ltd, (2000) 245 ITR 769 (Born.). Appeal 
was preferred by the Revenue be ~ore the High Court which by the impugned_ 
order dismissed the appeal answering the question raised in the appeal in 
F favour of the assessee and against the revenue. 
4. In the present appeal the stand is that one has to give plain meaning 
of the word "turnover" in the formula applied for computation. It was urged 
that there was no need to call for any rule of interpretation or external aid to 
interpret the said word. In essence, it was urged that having regard to the 
G plain words of the Section 'excise duty' and 'sales tax' ought to have been 
included in the "total turnover". It is to be noted that a similar plea was raised 
in Commissioner of Income Tax, Coimbatore v. Mis. Lakshmi Machine Works, 
JT (2007) 6 SC 236. In para 18 it was noted as follows: 
H 
"We do not find any merit in the above contentions ·advanced on 
behalf of the Department. It is important to note that tax under the Act 
COMMNR.OFINCOMETAXv.CATAPHARMA(INDIA)PVT.LTD.[PASAYAT,J.J 
467 
is upon income, profits and gains. It is not a tax on gross receipts. A 
Under Section 2(24) of the Act the word "income" includes profits and 
gains. The charge is not on gross receipts but on profits and gains 
properly so-called. Gross receipts or sale proceeds, however, include 
prof

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